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Procurement Perspectives: Negotiation skills are essential for procurement managers

Stephen Bauld
Procurement Perspectives: Negotiation skills are essential for procurement managers

One of the most common fallacies with respect to negotiation is the belief that it is possible to come to a mutually advantageous agreement with an adversary on any issue.

In a sense, it is always possible to come to some sort of agreement. In a good many cases, unless one side is prepared to make concessions, agreement is not possible.

The belief that a fair settlement can always be reached is founded partly on the dubious premise that all sides are likely to have at least some claim of right on their side. However, while it may be true that in any dispute no side is likely to be entirely black and white, it does not follow from this that each side is equally grey.

The second dubious premise is that in any given dispute each party can be expected to want a fair negotiated settlement. Unpleasant as the realization may be, some people are unreasonable and callously indifferent to the welfare of others.

Furthermore, some people are unable to understand when they have been offered a good deal, or even who their real friends are.

It is very difficult to reach an agreement when the person with whom one is dealing lacks the capacity to make a proper assessment.

A person that enters into negotiations should always make clear to the other party that negotiations can proceed only if they are carried forward on a reciprocal basis.

A process of unilateral concessions may sometimes seem like a good way to get things started, but only rarely does it have this effect. Unilateral concessions create unrealistic expectations. A far better approach is to offer a concession, but to make clear that it will only be available if fair value is offered by the other side.

It is not necessary to state what the fair value must be, but it must be clear that the other party must offer an equivalent concession in return in order to secure what is on offer.

Negotiations are intended to lead to, as they say, win-win results. They cannot do so if one party makes all the concessions.

While a proper professional approach to negotiations may facilitate the settlement process, it is important to understand that it is not always possible to settle disputes through negotiations.

The biggest source of power that a party enjoys when negotiating is the ability to walk away from further discussions. This choice should never be made, however, unless the net benefit derived from so doing is at least equal to the benefit of continuing discussion.

At the very least, a party who is intending to walk away must have an alternative to implement, once the negotiations break down, what is sometimes called the Best Alternative to a Negotiated Agreement (BATNA). In addition to working out its own BATNA, each party should also attempt to anticipate the BATNA of the other party.

There are two reasons for doing so doing.

If both sides have high BATNAs, negotiators must offer a very good deal for both sides, or one or the other will quickly decide to walk away.

In other words, tough bargaining against someone who enjoys a good BATNA has a high probability of failure.

Closely related to BATNA is the reservation price. Before entering into negotiations, it is best to decide on the point at which it will be concluded that negotiations have reached an impasse. Once this point is reached, the negotiations should at least be suspended.

A failure to set a clear point exposes a party to the risk of manipulation by the other side.

Far too often negotiations take on a life of their own and the parties involved in the negotiation feel under pressure to reach an agreement no matter what the terms may be offered as a deal.

Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com. Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.

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